The Pharmaceutical Industry 2000

1. The Pharmaceutical Industry 2000 Zhu Haiqing Lee Lee Chen Ganesh Kumar Gabriel Rüeck Chen Xingge

2. Environmental Forces (PESTEL) Political Economic Sociocultural Technological Environment Legal • Government Intervention • Price and reimbursement control • Blacklist and de-list • Managed competition • Government Policy • Political Stability

3. Environmental Forces (PESTEL) Political Economic Sociocultural Technological Environment Legal • Business Cycle • Disposable Income • Economic Development Status • Ease of Finance • Exchange Rate Risk

4. Environmental Forces (PESTEL) Political Economic Sociocultural Technological Environment Legal • Population Demographics • Customer Behaviors • Life style changes • Religion & Beliefs • Level of Education

5. Environmental Forces (PESTEL) Political Economic Sociocultural Technological Environment Legal • Government Supporting on Research • Research Infrastructure • Advance in Biotechnology • Speed of Technology Transfer • Information and Communication Technology

6. Environmental Forces (PESTEL) Political Economic Sociocultural Technological Environment Legal • Regulatory Control on Development • Regulatory and Supervision between Countries • Trade Policies • Patent Protection • Regulation on Horizontal & Vertical Integration • Ban on DTC Advertising

7. Environmental Forces (PESTEL) Political Economic Sociocultural Technological Environment Legal • Environmental • Waste and Pollution Disposal • Others • New Diseases like SARS • Other emergency

8. Legal Political Potential entrants Rivalry within the competitive arena Suppliers Buyers Environmental Economic Potential substitutes Technological Sociocultural Pharmaceutical Industry Macro Environmental Competitive Environment within the Industry Source:Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael Porter

9. Legal Political Suppliers Potential entrants Potential substitutes Buyers Environmental Economic Rivalry within the competitive arena Technological Sociocultural Pharmaceutical Industry Macro Environmental Competitive Environment within the Industry Firms Source:Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael Porter

10. Relevance of MP’s 5-Forces Framework • In origin time horizon • A useful tool for analyzing the environment • When macro-environmental factors had a moderately low impact on the industry • Competitive forces played a dynamic role • In recent past and future • Increasing uncertainty in the macro-environment • Significant implications of PESTEL factors on competitive environment • The more uncertain the external factors, the less powerful is MP’s 5-forces framework.

11. Various Frameworks in Analysis of Pharmaceutical Industry Relevancy PESTEL Framework Others, including Scenario Planning MP’s 5-forces Framework Time Horizon Origin Recent Past Future

12. yes yes Wife? Wife? no no yes low high no Car? Income? low high Income? Theory of Scenario Planning We can also have multidimensional scenarios!

13. Scenario Planning (Step #1) High Impact High Uncertainty New Diseases Consumer Buying Pattern Technological Progress Healthcare Funding System

14. Scenario Planning (Step #2) no epidemics New Diseases new epidemics (SARS, Ebola, …) no breakthrough development Technological Progress new effective treatments restrictive use Consumer Buying Pattern active interest in health & lifestyle government Healthcare Funding System purely private

15. Scenario Planning (Step #3) Scenario 1: NO GREAT CHANGES • Focus on: • Decrease production and R&D cost • Horizontal and vertical integration • Adapted move to developing markets (China, India) • Complete product spectrum no epidemics no breakthrough development restrictive use no changes in funding • Structural Changes: • No abrupt changes. • Other Factors: • Patent expiries lead to eroding profits

16. Scenario Planning (Step #3) Scenario 2: AGE OF PLAGUES • Focus on: • Increase R&D efforts • Lobby for accelerated field trials • Secure government funds • Increase production of supplementary treatments • Market “prophylactic” medicine new epidemics (like SARS, Ebola) no breakthrough development active interest in health & lifestyle • Structural Changes: • Associate with R&D institutes, universities, laboratories • Buy prospective companies • Prepare distribution channels • Speed is important! no changes in funding • Other Factors: • Lack of breakthrough therapy inhibts profit growth

17. Scenario Planning (Step #3) Scenario 3: GOLDEN AGE OFHEALTHCARE • Focus on: • Secure IPR and file patents • Fast time-to-market • Lobby for government funds • Lobby intermediaries, disintermediate some markets • Brand awareness • Fight plagiarism new epidemics (like SARS, Ebola) breakthrough progress in therapies active interest in health & lifestyle government funding for disease control • Structural Changes: • Flexible production facilities • Efficient worldwide distribution system • Customized medicine  standard product, more segments • Speed is important!

18. Likely Implications of Changing Business Environment • Increasing market potential in Asia • Attract international firms to set up operations in Asia • New diseases and deadly epidemics • Influence location of bases • setting up clinical and research centers • Cater to emergency demand • Threats of terrorism • Spread risk - do not place all eggs in 1 basket • Influence location of base

19. Likely Implications of Changing Business Environment • Relative lower cost in Asia • Shift in manufacturing base - China, India • Increase in outsourcing • Shorter time to market • Emergence & distribution of R&D centers • Increased competition • Home grown companies competing against MNCs

20. Likely Implications of Changing Business Environment • More M & As • Shift in market leader position • Consolidation • Advances in technology • Race to be the breakthrough center • Increase in intensity in R&D • Talent much sought after

21. How does this relate to Singapore ? • Great opportunity • attract pharmaceutical firms to invest in Singapore • Singapore possess many strengths • political stability • responsive government • robust infrastructure • extensive trade links • good IP protection framework • leading financial center • R&D resources • educated workforce • vibrant cosmopolitan city state

22. How does this relate to Singapore ? • Singapore’s Vision - • Position itself to be the Biopolis of Asia • where biomedical sciences companies will locate their manufacturing, R&D, clinical development and headquarter activities here • Pharmaceutical, medical technology , biotechnology and healthcare services • Aims to be global hub for both big and small technology intensive firms

23. How to get there ? • Singapore government very committed • Actions, Initiatives, Efforts taken • Top level ministerial involvement • Establishment of councils, regulatory bodies, legal framework • Establishment of robust ethical framework • Establishment of physical infrastructure • Provision/ Availability of funds/resources • Establishment of a regime for protection of intellectual property rights • Attraction, retention & nurturing of talents • Financial & economic incentives • More vibrant lifestyle • Intensify R&D

24. Singapore is not alone Government Investments in Biotechnology (million USD) Source: Frost & Sullivan, http://www.medisourceasia.com/markettanalysis/pharmaceuticalindustry/news1_01.htm

25. Singapore is not alone • China, Korea, Japan, Taiwan are also in the same race • Advantages over Singapore : • Huge domestic market • Larger talent pool

26. Can Singapore be a global player? • Can excel in R&D, clinical development and headquarters activities but difficult to compete in manufacturing • Real test is the breakthroughs in R&D and clinical development • dependent on talent • dependent on the “culture” and “environment” • Strong reputation and branding required • Results • ethics management • global branding

27. Thank You! Q&A…